Tag: Nouriel Roubini

Dr. Roubini says rising oil prices will stifle any possible recovery

You have to follow CNBC to get the straight talk from the master seer:

“Oil could be closer to $100 a barrel towards the end of this year, this could be a negative shock to the economy.”

Or you could have gotten the much less publicized version of the relatively same opinion almost two months ago:

No matter – if oil continues its march, consumers won’t be joining the summer of love. And any chance of the recovery the powers that be are trying to convince them is well in hand will be swirling in a tanker parked off the Gulf Coast.

How this all plays out is anyone’s guess, but with interest rates also on the rise it seems unlikely that we are going to see burgeoning demand for goods in the near future. There’s just too much out there, and given the choice between a widescreen TV and filling up the tank, the latter is going to win hands down. Heck, even yard sales are hurting for business.

The United States Of Ponzi

Nouriel Roubini pulls no punches:

Americans lived in a “Made-off” and Ponzi bubble economy for a decade or even longer. Madoff is the mirror of the American economy and of its over-leveraged agents: a house of cards of leverage over leverage by households, financial firms and corporations that has now collapsed in a heap.

When you put zero down on your home, and you thus have no equity in your home, your leverage is literally infinite and you are playing a Ponzi game.

And the bank that lent you, with zero down, a NINJA (no income, no jobs and assets) liar loan that was interest-only for a while, with negative amortization and an initial teaser rate, was also playing a Ponzi game.

Yep – it’s all that evil Wall Street banker’s fault. You twits!

BTW: there’s more Ponzi here.

Dr. Nouriel Roubini, please take a bow

And then grab a stage break

Nobody can be right all the time, but Dr. Nouriel Roubini has come pretty darn close so far. That does not, however, preclude being correct into perpetuity.

Dr. Roubini has now grasped near constant media attention, and I believe the media’s insatiable desire for content to force down the world’s throats will eventually perpetuate the production of new material that may not fit Dr. Roubini penchant for diligence. In other words, the man is in demand, and I fear it will eventually lead to some slips (if it hasn’t already):

So what can the government do? The easy part is lowering interest rates and buying toxic assets. The hard part, he says, will be tackling housing. Roubini says that the housing market, like a company restructuring in bankruptcy, needs to have “face value reduction of the debt.” Rather than go through mortgages one by one, he says reduction has to be “across the board…break every mortgage contract.”

This proposal smells faintly like an attempt at populism – and it surely would be well received by the indebted, everywhere. However, I’m not sure if Dr. Roubini thinks that by simply restructuring every mortgage on the planet borrowers will take the lesson to heart – if he does I think he is suffering from a bit of media fatigue. I’m somewhat more convinced that such a debt reduction will eventually find its way back to the balance sheets of citizens, in the form of new digital televisions and other like-kind frivolities, the desire for in the grand scheme of keeping up with the Joneses which got us into such a nasty mess in the first place. Make no mistake about it – lowering interest rates, the first-round enabler of the Jones family’s now cracked granite countertops, will guarantee it.

On a separate note, the prognostication continues at RGE Central:

Earnings per share (EPS) of S&P 500 firms will be in the $ 50 to 60 range, but they could fall to $40. The price earnings (P/E) ratio may fall in the 10 to 12 range in a U-shaped recession. If earnings are closer to 50 or the P/E ratio falls to 10 then the S&P could fall to 600 (12 x 50 or 10 x 60) or even to 500 (10 x 50). Equivalently the Dow (DJIA) would be at least as low as 7000 and possibly as low as 6000 or 5000.

See anything you can use to leverage informed decision making? I didn’t think so. The rest of us are looking at the charts, and seeing a potential bottom on the S&P of around 450. Charts are pretty much bunk as well.

Conclusion

There are laws of diminishing returns with respect to all analysis. My suggestion is Dr. Roubini take a breather from his, before the attention firestorm results in paralysis.

Around the world in nine links flat – 03/05/09

World MapTechnology

  • Surprise – cyber-crooks are targeting Facebook. This is like shooting fish in a barrel, but Facebook participants won’t understand that until it’s too late. They are busy throwing up pages in a vain attempt to garner attention, and have to figure out that the barrel is already too big first.
  • Speaking of social networks, you only have five core friends anyway. The rest are, I guess, ‘fake friends’.
  • But if you still think you have more friends than that, Yahoo! is on their way to helping you stay caught up with them. It’s a collaboration with JS-Kit for access everywhere.

Finance

  • Everyone who disagrees with the present administration’s economic policies is now evil, at least in the eyes of Paul Krugman. Greg Mankiw is willing to bet hard money that the GDP forecasts being floated to justify the massive spending are, for the most part, bunk. Will Vegas take side bets?
  • The Fed is not only bailing out ‘unfortunate’ homeowners – now that third mortgages for widescreen TVs are passe, they are going to start funding credit card balances instead.
  • And just in case anyone is still wondering where the financial world is headed, let’s ask the world’s presently most popular prognosticator, Nouriel Roubini: Mr. Roubini, what say ye? The U.S. financial system is effectively insolvent. Ok, got it.

Fly Fishing

  • Science folks speculate that hunting trophies leads to smaller fish. There’s a lot of killing mentioned, which leads me to believe the studies may be funded by PETA. Meanwhile, down in the Keys, it’s long been known that the biggest bonefish reside in Islamorada specifically because so many trophy fish are released there during tournaments.
  • Speaking of Florida, high-income earners aren’t the only one’s who may be seeing tax hikes. Guides have long had an exemption from sales tax, but the state legislature is discussing a change to that. Ron Brooks notes (correctly) that not only will guide/charter fishing rates go up, but the bookkeeping will add additional burden to an already very hard working group of folks.
  • And finally…

  • The Roughfisher is ready for spring – it’s just that spring isn’t ready for him. Spring has been in and out of Colorado for weeks – we’d weep for the rough dude, but we’re too busy fishing. I’m not being spiteful, really I’m not.

Adieu.

Roubini Says ‘Panic’ May Force Market Shutdown

Via Bloomberg:

“We’ve reached a situation of sheer panic,” Roubini, who predicted the financial crisis in 2006, told a conference of hedge-fund managers in London today. “There will be massive dumping of assets” and “hundreds of hedge funds are going to go bust,” he said.

Of course, hundreds of hedge funds are already going bust, and those that aren’t are still seeing massive withdrawals that are forcing them to liquidate positions.

We are also witnessing a “stampede for the exit” – it’s just that some are slipping back in when the door is ajar.

We Are Facing an ‘Inflation Holocaust’

Snippets from Jim Rogers:

The way to solve this problem is to let people go bankrupt. “Then you will hit bottom and then you start over. The people who are sound will take over the assets from the people who aren’t sound and we will start over. This is the way the world has worked for a few thousand years…

The current rescue plans, which will force governments to issue more debt, print money and flood the markets with liquidity, will flare up inflation after the crisis is over and will create worse problems…

We had the worst excesses we had in credit markets in world history. We’re going to have to take some pain…

Many people bought 4-5 houses with no money down and no job… you think we’ll just say well, that’s too bad, we’ll start over and nobody loses their job? Be realistic.

And this:

We’re setting the stage for when we come out of this of a massive inflation holocaust.

Jim Rogers has been right about as much as Nouriel Roubini, which is to say an awful lot. I do, however, find it somewhat odd that their prospective remedies seem to differ quite a bit.